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Lawyer Says Tyco Paid for House

He testifies that former finance chief urged him to buy $2.5-million home of merger partner ADT's chief executive.

November 21, 2003|From Bloomberg News

A lawyer for Tyco International Ltd. told a New York jury Thursday that former Chief Financial Officer Mark Swartz asked him to buy a house on behalf of the company from the chief executive of a Tyco merger partner.

The lawyer, Byron Kalogerou, said he bought a Florida home belonging to ADT Ltd. Chief Executive Michael Ashcroft in 1997 for $2.5 million, using money supplied by Tyco. The sale wasn't reported to investors, Kalogerou said. A Tyco subsidiary bought the house about the time the company merged with ADT. Ashcroft later joined Tyco's board.

"He asked me if I wanted to buy a house," Kalogerou said, recounting a 1997 phone conversation he had with Swartz.

Prosecutors say the transaction is an example of how Swartz and former CEO L. Dennis Kozlowski conspired to deceive Tyco's board and loot the company of $600 million. The two men are accused of stealing $170 million from corporate loan programs and making $430 million from sales of Tyco stock, the price of which they inflated by misleading investors. They are on trial in state Supreme Court in Manhattan.

Kalogerou told jurors he served only as a nominee owner of the property and never lived in the five-bedroom house with a pool situated on Florida's Intracoastal Waterway. He said he was living in Luxembourg at the time of the transaction, working as general counsel for Tyco's international units.

In their conversation, Swartz said Tyco could not buy the house because the homeowner's association in the Florida development prohibited corporate ownership, Kalogerou said.

Tyco office manager Lorraine Schell, who testified this month, told jurors Kozlowski lived at the home for several months in 1998 while he built another house in Boca Raton, Fla. In 1999, the parents of Kozlowski's girlfriend at the time, Karen Mayo, stayed there for several weeks, Schell said. Kozlowski and Mayo later married.

Schell also told jurors that she heard others were staying at the house and said Mayo had originally asked for 15 to 20 keys, saying she frequently lost them.

Schell said the Tyco subsidiary, ADT Security Systems, paid all expenses for the property until 2002, when it was sold. Schell said she got two calls from ADT employees asking why the company was paying the bills. After the first call, she questioned Kozlowski about the arrangement and he said it was proper because ADT owned the house, Schell testified.

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